Economic integration through globalization

Globalization of economies dates back to start of 20th century that is period prior to World War One when it started shaping into a long distance trade and commerce among various rich and less-developed countries particularly those which were under colonial powers including Indo-Pakistan subcontinent. Telegraph services railway and steamship were the means to facilitate commercial integration among countries. Globalization got boost right from middle of the 20th century and in this regard fastest means of transport like jet airliners and modern means of communication mainly accelerated advancement in information technology brought integrated technological revolution all over the globe. According to statistics available with World Bank, by start of 2014 there were 96 mobile phones subscription and 40 internet users for every 100 inhabitants.
Information is increasingly digital as such number of interconnected population of the globe continue to increase unlike the era of early 20th century when empires themselves had made possible long distance commerce and trade arrangements , but now institutions like treaties and multilateral organisations like World Trade Organisation (WTO), International Monetary Fund and regional clubs like European Union etc have not only facilitated economic integration, but also prompted closed economies to enter into trade relations with rest of the world. Expanding financial markets in rich and emerging economies operating 24 hours greatly facilitated fast integration of economic activity across borders in recent years.
China's adoption of 1970 reforms and opening up policy, launch of European Union and Indian move to remove all trade barriers and operate freely regarding trade and international relations and most importantly fast technological development have speeded up the process of economic integration among countries and almost all economies are more open to trade.
Among the emerging economies particularly of Asia due to availability of cheap labour, ratio of trade to GDP of concerned countries rose abruptly. China's trade ratio of goods in trade to GDP rose from 33% in 1970 to 63% in 2006. Ratio of India's trade to GDP rose from 18% in 1996 to 40% in 2008. According to the World Bank's survey report trading ratio of emerging economies rose fast during last two decades. In 1990 60% of trade in goods and services was among rich countries, 34% among economically developed and emerging economies and only 6% was handled under emerging market economies. Whereas position of trading among above said category of countries by 2013 was 31%, 45% and 24% respectively.
Financial flows and foreign direct investments have also multiplied due to cross-border economic integration. Economic integration via movement of people does not match with the rate of growth of trade and commerce and financials flows particularly through foreign direct investments. People's movement mostly concentrates in the Middle East countries, the USA, Canada and Australia etc accommodating large number of workforce from low income countries of South East Asia and Africa mostly of Sub-Saharan region.
Globalization particularly in context of South East Asian countries has caused massive decline in poverty. According to World Bank's survey report of 2014 proportion of population living on less than $1.25 a day at purchasing power parity fell from 77% in 1981 to 14% in 2008.
In South Asia proportion in extreme poverty declined from 61% in 1981 to 36% in 2008. African states particularly Sub-Saharan countries registered a decline of only 2% of population living in extreme poverty during the same period. The World Bank report of 2013 hints at the fact that despite substantial rise in per capita GDP in a middle income and emerging economies inequalities of income has become an acute problem particularly for this category of countries. The report further reveals that global beneficial rise in real income was associated with rise in inequality within high and middle income countries. Further it was expected that globalization resulting in fast advancement in technology will be beneficial for all aspects of economy of a country, reducing the cost of transport of goods and people, but this has not happened anywhere as it has no doubt opened up far greater opportunities for trade in ideas and information than in goods or people. Information technology is the area which got highest boost in present era of globalization thus providing 24/7 hours linkage among countries at the least cost comparing its benefits accruing to the countries concerned.
No doubt globalization trends in last three decades has made it possible to regulate and monitor through globally formulated checks and balances like Basel 1, 2 and 3 requirements for paid-up capital of financial institutions for achieving sustainability of the institution through maintaining proper capital adequacy ratio and safeguarding the interest of all stakeholders. Despite this prudent policy to regulate financial sector World Bank reports show that during the period from 1970 to 2011, 147 banking crises of varying nature occurred covering various parts of the globe, most important being Asian crisis of 1997-98 and the wide spread recession of 2008-09 and thereafter financial crisis faced in Euro area. These financial turbulents resulted in incurring heavy economic and fiscal cost. Thus success of globally-regulated financial system continues to be uncertain.
Globalization, however, remarkably promoted trade policy both in economically rich and developing economies, but benefits of fast growth in trading did not go to developing economies because of protectionist policy adopted by almost all economically rich countries.
Majority of recommendations of WTO at Doha Round did not see light of the day. Through WTO regime developing countries had demanded halting discriminatory trade preferential and wanted preferential treatment in the form of 'trade aid' from developed countries, preferential access to their markets, liberating their capital accounts for enhancing the flow of investments in low income countries and most importantly removing agriculture subsidies and tariffs.
Another significant feature of globalization since seventies has been the floating currency system with dollar in a dominant position. This proved of great disadvantage for developing countries as United States manipulated the inflow and outflow of foreign exchange to build up its own economy and getting maximum benefits from developing economies for providing linkage to their currencies in terms of dollar. Other currencies like yen getting stronger in eighties and nineties could not attain dominant position against currencies of developing economies of even South East Asia. It is the commanding position of US dollar, which was identified as one of the reasons of non-implementation of Doha Agreement under WTO.
There was another observation in World Bank report that in order to rectify commercial imbalances some of the emerging economies tried to control the Internet but halting commercial activity is not possible and instead it would stop the access of their citizens to adverse news and uncomfortable experiences of developing economies due to manipulation of economic activity by super powers. Due to this adverse political dimension integration of economic activity is likely to suffer and in the course of time, one may notice gradual shift towards closed economy by some of the low and middle income developing countries.
Unfortunately, the trend of events during last 50 years shows that only political choices are overtaking economic activity and advancement in technology and giving varying shapes to globalization. It depends on countries to proceed prudently with agenda of eradicating global income inequalities to bring peace and tranquility all over the globe.